Winding Up & Liquidation of Companies

Yuen Law Singapore law acts for companies facing insolvency, debt restructuring, liquidation or winding up. Our lawyers also act for shareholders, creditors, liquidators, judicial managers, receivers, managers and other interested parties.

In today’s commercially volatile world, businesses may find themselves facing financial hardship or insolvency due to myriad factors affecting their ability to repay debts or monies owed. Insolvency is defined as a state or status where a company is unable to pay its debts as they become due, or its liabilities exceed its assets. This affects both the company facing the hardship, as well as its creditors. Creditors may seek to recover their debts or enforce security on debts owed.

Yuen Law’s insolvency lawyers possess in-depth understanding of Singapore’s Insolvency, Restructuring and Dissolution Act, the Companies Act in Singapore and practices. We handle a wide range of cases including insolvency litigation, bankruptcy, debt restructuring and liquidation. Should things come to a stage where a company faces voluntary or compulsory winding up, our lawyers can help parties navigate the procedures and statutory requirements, working closely with liquidators every step of the way. Our experienced insolvency lawyers ensure that our client’s interests are represented at creditors’ meetings, and that their rights are protected throughout the winding-up proceeding. Our commitment is to secure the best possible value for our clients.

Note: Corporate insolvency differs from bankruptcy, which is the legal process that applies to individuals and partnerships in Singapore that are unable to repay their debts.

What is Winding Up?

Winding up is commonly known as liquidation.

Both refer to the crucial process of selling off a company’s assets and distributing the proceeds to creditors to settle its debts. Any monies remaining after all debts, expenses and costs have been paid off are distributed among the company’s shareholders by the appointed liquidators.

Liquidation is part of the winding up process. Once liquidation is complete, the company will be dissolved and cease to exist.

Is winding up or liquidation compulsory when a company becomes insolvent?

In 2020, the Insolvency, Restructuring and Dissolution Act came into force. The Act is an omnibus legislation that consolidates Singapore’s personal and corporate insolvency and debt restructuring laws into a single piece of legislation and updates relevant laws to be aligned with international practices. The Act ensures that there is a just distribution of the company’s assets among creditors and contributors.

Not all companies must be wound up after becoming insolvent. Some companies may be facing temporary financial hardship, internal issues or suffer short-term impacts due to global economic developments, in which case debt restructuring may help improve cash flow and the possibility of business recovery.

Debt restructuring involves renegotiating the terms of a company’s debt, and entering into a scheme of arrangement with its creditors to make it’s financial commitments more manageable. This can include extending the repayment period, reducing interest rates, or converting debt into equity. A scheme of arrangement is subject to the Court’s approval and supervision. Successful debt restructuring allows the company time for financial rehabilitation and continue its operations without winding up.

However, in other situations, a company’s feasibility of recovery may be deemed low. In such cases, its existence can be terminated by its eventual dissolution.

A company can be wound up in one of these ways:

  • Voluntary Winding Up:
    • Members Voluntary Winding Up: The company’s shareholders vote to wind down a solvent business, meaning it is able to pay of any debts in full within 12 months.
    • Creditors’ Voluntary Winding Up: The company’s creditors meet and agree at a creditors’ meeting to wind up an insolvent company and appoint a liquidator.
  • Involuntary or Compulsory Winding Up: A company is forced to wind up if the company is unable to pay its debts. The company’s creditors, shareholders, liquidator, judicial manager may make a winding up application to the High Court.

What are the common reasons for winding up a company?

The most common winding up applications we encounter involve companies facing insolvency, or an inability to pay its debts. However, there are various other reasons that may lead to a company winding up, such as:

Parties that Yuen Law can represent

Besides advising companies, shareholders and creditors, Yuen Law can act for liquidators, judicial managers, receivers and managers during restructuring exercises, whether in court or through private negotiations.

Whether you are a creditor, shareholder or an interested party, our firm can assist with commencing winding-up applications or advising on voluntary liquidations.

Please contact us and schedule an appointment to discuss your insolvency needs. Yuen Law’s insolvency lawyers are here to offer practical solutions and remedies, ensuring the best possible recovery for you.

Useful Reading:

WhatsApp us or use our Inquiry Form to send us more details

This site uses cookies to offer you a better browsing experience. By continuing to use this site, you are consenting to the use of cookies on your device as described in our privacy policy